Home › Circulars › RBI/2006-2007/348

CRR for UCBs: No Floor/Ceiling, Interest Stopped

Current · Source: Reserve Bank of India · RBI/2006-2007/348 · issued 25 Apr 2007 · ~2 min read
Quick answerRBI removed the statutory 3% CRR floor for Urban Co-operative Banks effective April 1, 2007, and can now set CRR without limits. CRR rates were kept at 6.25% and 6.50% for specified fortnights, and interest on CRR balances was discontinued from March 31, 2007.
The rule, in the simplest words
How it plays out — a real example

A co-operative bank branch officer in Indore, Priya, is updating her bank's cash reserve calculations. She used to set aside at least 3% of all deposits as CRR, but now she knows RBI can ask for any percentage. She also stops adding interest income to her books for the CRR balance, because from March 31, 2007, that interest is gone. She checks the new rates: 6.25% for the fortnight starting April 14, and 6.50% for the one starting April 28, and adjusts her liquidity planning accordingly.

What changed

The statutory minimum CRR of 3% of net demand and time liabilities for Scheduled Primary (Urban) Co-operative Banks was removed effective April 1, 2007, following the Reserve Bank of India (Amendment) Act, 2006. RBI now has the power to prescribe CRR without any floor or ceiling. Additionally, interest payment on CRR balances maintained by these banks was stopped from the fortnight beginning March 31, 2007.

What it means for you

UCBs now face a more flexible but potentially higher CRR regime, as RBI can adjust rates without statutory constraints. The removal of interest on CRR balances increases the cost of maintaining reserves, directly impacting liquidity management and profitability. Banks must closely monitor RBI's fortnightly CRR changes to avoid penalties.

What you must do

Who it affects

All Scheduled Primary (Urban) Co-operative Banks, Treasury and ALM teams of UCBs, Compliance and finance departments of UCBs

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Why was the 3% statutory CRR floor removed?

The removal followed the Reserve Bank of India (Amendment) Act, 2006, which gave RBI full discretion to set CRR without any floor or ceiling, aiming to enhance monetary policy flexibility.

What are the new CRR rates for UCBs from April 2007?

CRR was set at 6.25% of net demand and time liabilities from the fortnight beginning April 14, 2007, and 6.50% from April 28, 2007, with no interest paid on these balances.

Does this circular affect interest on CRR balances?

Yes, interest on CRR balances maintained by UCBs was discontinued from the fortnight beginning March 31, 2007, as per the amendment to Section 42(1B) of the RBI Act.

📜 Read the original circular — full text as issued by RBI
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No.5/12.03.000/2006-07 dated April 05, 2007 on the captioned subject. Government of India in their Extraordinary Gazette notification No.S.O.337 (E) dated March 9, 2007 have notified April 01, 2007 as the date on which all the provisions of Section 3 of the Reserve Bank of India (Amendment) Act, 2006 shall come into force. Consequent upon the provisions of Section 3 of the Reserve Bank of India (Amendment) Act 2006 coming into force, the amendment carried out to sub-section (1) of Section 42 of the Reserve Bank of India Act, 1934 has been brought into force with effect from April 01, 2007. Accordingly, the statutory minimum CRR requirement of 3 per cent of total demand and time liabilities no longer exists with effect from the said notified date. The Reserve Bank of India, having regard to the needs of securing the monetary stability in the country, may from time to time prescribe the CRR for Scheduled Primary (Urban) Co-operative Banks without any floor and ceiling rate. 2. In exercise of the powers conferred on the Reserve Bank of India, it has been decided to continue the status quo on the rate of CRR to be maintained by Scheduled Primary (Urban) Co-operative Banks and the extant exemptions which will be operative till further changes are notified. Accordingly, Scheduled Primary (Urban) Co-operative Banks shall continue to maintain CRR on their total demand and time liabilities, subject to the exemptions as indicated in our circular RBI/2006-2007/347 UBD (PCB) Cir.No./6 /12.03.000/2006-07 dated April 25, 2007 from the fortnights as detailed below. Effective Date ( i.e. , the fortnight beginning from) CRR on net demand and time liabilities (per cent) April 14, 2007 6.25 April 28, 2007 6.50 3. Further, in view of Section 3 of the Reserve Bank of India (Amendment) Act, 2006 coming into force, sub-Section (1B) of Section 42 of the Reserve Bank of India Act, 1934 stands omitted with effect from April 01, 2007. Consistent with the amendment and in partial modification of our circulars RBI/2006-2007/271 UBD (PCB) No. 3 / 12.03.000/2006-07 dated March 01, 2007 and RBI/2006-2007/311 UBD(PCB)No.5/ 12.03.000/2006-07 dated April 05, 2007 , it has been decided that with effect from the fortnight beginning March 31, 2007, the Reserve Bank of India will not be paying any interest on the CRR balances maintained by Scheduled Primary (Urban) Co-operative Banks. 4. A copy of the relative notification UBD UBD(PCB)NO/7/ 12.03.000/2006-07 dated April 24, 2007 is enclosed. 5. Please acknowledge receipt. Yours faithfully (N.S.Viswanathan) Chief General Manager in-Charge 2026 All Months January February March April May June July August September October November December 2025 All Months January February March April May June July August September October November December 2024 All Months January February March April May June July August September October November December 2023 All Months January February March April May June July August September October November December 2022 All Months January February March April May June July August September October November December 2021 All Months January February March April May June July August September October November December 2020 All Months January February March April May June July August September October November December 2019 All Months January February March April May June July August September October November December 2018 All Months January February March April May June July August September October November December 2017 All Months January February March April May June July August September October November December Archives 2016 All Months January February March April May June July August September October November December 2015 All Months January February March April May June July August September October November December 2014 All Months January February March April May June July August September October November December 2013 All Months January February March April May June July August September October November December 2012 All Months January February March April May June July August September October November December 2011 All Months January February March April May June July August September October November December 2010 All Months January February March April May June July August September October November December 2009 All Months January February March April May June July August September October November December 2008 All Months January February March April May June July August September October November December 2007 All Months January February March April May June July August September October November December 2006 All Months January February March April May June July August September October November December 2005 All Months January February March April May June July August September October November December 2004 All Months January February March April May June July August September October November December 2003 All Months January February March April May June July August September October November December 2002 All Months January February March April May June July August September October November December 2001 All Months January February March April May June July August September October November December 2000 All Months January February March April May June July August September October November December 1999 All Months January February March April May June July August September October November December 1998 All Months January February March April May June July August September October November December 1997 All Months January February March April May June July August September October November December 1996 All Months January February March April May June July August September October November December 1995 All Months January February March April May June July August September October November December 1994 All Months January February March April May June July August September October November December 1993 All Months January February March April May June July August September October November December 1992 All Months January February March April May June July August September October November December 1991 All Months January February March April May June July August September October November December Top Back to previous page More Links Bank Holidays Banking Glossary Citizen's Charter Complaints Contact Us COVID-19 Measures E-LMS Events FAQs Financial Education Forms IFSC/MICR Codes Important Websites Opportunities @ RBI RBI Clarifications RBI Kehta Hai RBI’s Vision and Values (1257 kb)--> Right to Information Act Tenders Follow RBI RSS Twitter YouTube Instagram Facebook LinkedIn © Reserve Bank of India. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2006-2007/348 · issued 25 Apr 2007. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
💻 IT / Systems
  • Update internal CRR computation systems to reflect removal of the 3% statutory floor and new rate schedule (6.25% from April 14, 2007; 6.50% from April 28, 2007).
📜 Compliance
  • Cease accruing interest on CRR balances from the fortnight beginning March 31, 2007, and adjust accounting entries accordingly.
  • Review liquidity buffers and contingency funding plans to manage higher CRR requirements without interest compensation.
  • Ensure compliance with the revised CRR maintenance rules and exemptions as per circular RBI/2006-2007/347.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are an IT/Systems lead at a bank this circular applies to (All Scheduled Primary (Urban) Co-operative Banks, Treasury and ALM teams of UCBs, Compliance and finance departments of UCBs), your first concrete step on “CRR for UCBs: No Floor/Ceiling, Interest Stopped” is: “Update internal CRR computation systems to reflect removal of the 3% statutory floor and new rate schedule (6.25% from April 14, 2007; 6.50% from April 28, 2007).” (RBI issued this 25 Apr 2007).

  1. Circular: RBI/2006-2007/348 -- CRR for UCBs: No Floor/Ceiling, Interest Stopped
  2. Issued: 25 Apr 2007
  3. Action required: Update internal CRR computation systems to reflect removal of the 3% statutory floor and new rate schedule (6.25% from April 14, 2007; 6.50% from April 28, 2007).
  4. Action required: Cease accruing interest on CRR balances from the fortnight beginning March 31, 2007, and adjust accounting entries accordingly.
  5. Action required: Review liquidity buffers and contingency funding plans to manage higher CRR requirements without interest compensation.
  6. Action required: Ensure compliance with the revised CRR maintenance rules and exemptions as per circular RBI/2006-2007/347.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3453&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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